Managed care helps erode
January profits at hospitals
Crawford Long and Emory Hospital employees faced a surreal moment as
they walked into their respective auditoriums for the second in a series
of employee forums March 15-20. Each watched the other via real-time projection
of both auditoriums-a process that produces a somewhat dreamlike, quasi-slow
motion effect. The only difference between the two sparsely populated rooms
was the color of the chairs on which employees sat.
The news they heard Monday, March 16, from Mike Riordan and Al Blackwelder,
chief operating officers of Emory Hospital and Crawford Long, respectively,
was more down to earth, however. The administrators didn't sugarcoat the
fact that in the month ending Jan. 31, the latest for which complete figures
are available, the hospitals combined made only about half their projected
income-$12.7 million of an expected $24.4 million. Both cited lower-than-expected
managed care reimbursements and increased reserves for bad debt and charity
care as significant factors in the loss of income.
Despite this news, there are some silver linings. Both Riordan and Blackwelder
believed February's figures would be much brighter for each of their hospitals,
which continue to make money, although not as much as they'd like. And they
actually came in 1.5 percent under budget in January per admission expenses.
While a $8,279 cost per patient admission had been budgeted, the hospitals
actually spent $8,156.
Emory Hospital's difficulties began in November, said Riordan, but reached
their peak in January. Because January is the traditional start date for
new enrollees in health care plans, hospital administrators saw more patients
than anticipated going into managed care programs at the year's beginning.
Had Emory Hospital not dipped into its reserves and added money to its balance
sheet in January, the news would have been even bleaker, said Riordan. "These
are pretty significant challenges from a budgetary standpoint," he
When Emory Hospitals CEO John Henry Sr. saw the downward income trend
in January, he asked senior administrators to come up with a cost reduction
plan of $1.2 million per month to get the hospital back on target, Riordan
said. They are taking a hard look at how most of the money is spent and
what costs can or cannot be controlled. In addition, they are hiring consultants
to compare staffing rates to competitors in the Atlanta market and nationally.
"Layoffs? Do we see that happening?" Riordan asked, anticipating
his audiences' response. "We can't say absolutely that will not be
the case, but we will try to meet our goals through attrition and normal
turnover. We will also look at consolidations [of hospital units] as in
the past," he said. "But we did want to set a context for what
is going on." Audience members at both hospitals, perhaps used to the
uncertainty of the current health care environment, had little reaction
to the news.
One area in which the hospitals have saved money is in consolidating
services wherever possible. "We've done a good job integrating what
we can up to this point," said Henry, who attended the meeting in Emory
Hospital's auditorium. "I'm not sure we can do much more integration
without affecting community doctor referrals at Crawford Long." Because
75 percent of admissions at Crawford Long are still made by its network
of community doctors-those not on the staff of Emory Clinic-and Emory Hospital
has a closed staff (only Emory doctors have hospital privileges), too much
integration would do more harm than good, he said.
Hoping to grow its market share by 5 percent in the coming years, Crawford
Long administrators want to embark on a major renovation. Patient surveys
show the hospital is in a good, accessible location, Henry said, but the
dated physician offices that surround it are no match for the state-of-the-art
facilities that serve as feeders to its chief intown competitor, Piedmont
In early March the Woodruff Center Board of Trustees authorized $1 million
to develop preliminary plans for a new Crawford Long. "We would keep
the Peachtree Building for patients and create a new diagnostic/theurapeutic
'chassis' [on Linden Avenue and Prescott Street]," reported Blackwelder,
who was clearly excited by the prospect. The plans would include a new medical
office building, women's center and emergency department. "This is
a once-in-a-lifetime opportunity to work on the design of a facility from
scratch," Blackwelder said.
Henry stressed that the changes will be a long time coming. "Even
if the plans were ready today, it would take another three years to move
in and another year of completion after that," he said
to March 23, 1998 Contents Page